Greeting Of The Day!
Home Loans are one of the easiest methods to accomplish your dream of having your own house. This kind of loan can be repaid comfortably in Equated Monthly Installments (EMIs).
We know the reality about the property costs, they are too high, particularly in urban areas, that result in long loan tenures, generally around 20 to 30 years.
Added to that the interest rate burden on these long tenure loans is too high, sometimes more and even double the principal amount taken. Well, early repayment of principal is one way out to reduce or offset this interest burden over the long term.
However, instead, people are looking for a more efficient way to reduce or offset this interest burden over the long term. So, is there any way out?
As per experts, there’s a way out and that is a Systematic Investment Plan In Mutual Funds.
Financial advisors and experts say that if borrowers start a SIP equal to 10 percent of the monthly installment amount as soon as the home loan EMI begins, the full home loan cost can be recovered.
Let us know how!
Recover Home Loan Cost With SIP in Mutual Funds……
Let us suppose if any individual is having a home loan of Rs 30 lakh, for long 25 years, (at 6.75 percent interest), then the individual has to repay about Rs 62 lakh which is more than double the principal amount.
On the other hand, along with this, if he invests Rs 6 lakh i.e., Rs 2000 per month (10 percent of monthly installment) in SIPs of mutual funds over 25 years, he can build a corpus of around Rs 66 lakh (with an estimated return of 15 percent p.a.).
Below is a picture describing the investment details:
Experts say, if one has disposable income after all the payment obligations, it’s always a good idea to start a SIP.
How SIP In Mutual Funds Help Recover Home Loan Amount?
SIP is a Systematic Investment Plan, allows investors to park money in small amounts and at regular intervals. This inculcates a habit of regular saving and investing and hence builds a financial discipline in the life of the investor. You can even start investing with a small amount of Rs 500 per month via SIP in mutual funds.
Other features of SIP like Rupee Cost Averaging, add to its benefits. Like with rupee cost averaging in SIP, the investor need not time the market to add money in their mutual funds. When he invests via SIP at times when the markets are high, the monthly SIP would buy fewer units and when the markets are low, the same monthly SIP amount would buy more units.
The most prominent benefit of SIP in mutual funds is that it helps accumulate much higher than the fixed deposit returns and can be considered as a set-off against the interest on the home loan.
Well, before you invest in mutual funds via SIP, you must know that investments into mutual funds are subject to market risk. Thus, investors are suggested to evaluate the risk associated with the fund they want to invest in.
You can contact your fund manager or can visit Ashutosh Securities Pvt. Ltd. for any further assistance in mutual fund investment. Keep reading our article and stay updated with the latest news about Mutual Funds!
For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).